Harmony considers sunsetting layer-1, migrating ONE tokens
Harmony proposes transitioning the ONE token to Ethereum as it considers shutting down its layer-1 blockchain following a recent exploit.
Megan Sutherland 2 min read
Overview of the proposed migration plan
Harmony is weighing a significant transition by proposing to discontinue its layer-1 blockchain and migrate its native ONE token to the Ethereum network. This move comes on the heels of a major exploit that compromised the network’s integrity just weeks before the announcement. According to Cointelegraph, the proposal is tentative, not yet binding, and lacks clarity about the timing of the final block production.
Mechanics of the migration process
Under the proposed framework, Harmony intends to take a final network snapshot. Following this, it plans to issue ERC-20 ONE tokens onEthereum, effectively marking a shift in how the token will be handled. The snapshot is set to capture all wallet balances, staking delegations, validator rewards, smart contracts, and centralized exchange holdings; notably, no claims will be required by users.
Validator roles and compensation
Validators on the Harmony network are presented with multiple paths during this transition. They can either opt to cease operations, continue in governance roles, or participate in a new initiative aimed at fostering AI-generated video content, described as a ‘remix economy.’ For those validating nodes that agree to stop in a timely manner, there is a compensation pool of $1.372 million available. This fund is intended for those who retain their stakes while supporting the migration process.
Context of the exploit
This proposed migration arises after a serious security breach that led to the creation of forged tokens. Initially reported on August 12, Harmony faced allegations that nearly 4 billion unauthorized ONE tokens were minted, which amounted to approximately 26% of the total supply. This situation necessitated a rollback, with Harmony looking to revert its blockchain to an earlier checkpoint and discard over 109,000 transactions.
Impact on existing blockchain applications
While the migration plan outlines a process for many token holders, it excludes certain components of the ecosystem. Specifically, Harmony advises users to withdraw from existing smart contracts, emphasizing that multisig safes, liquidity pools, and other on-chain applications will not be transferred to Ethereum. Users are urged to complete these actions before the critical date of September 10.
Regulatory implications for Canadian investors
For Canadian investors, such regulatory considerations may be relevant. Harmonious decisions and any shifts in token management could attract scrutiny from regulators, such as the Ontario Securities Commission (OSC) and the Canadian Securities Administrators (CSA). Additionally, compliance with regulations regarding custody, especially for the new ERC-20 tokens, may become a point of interest as the ecosystem evolves.
Future direction for Harmony
As Harmony pivots towards this new phase, it signals a broader trend among blockchain projects facing security and operational challenges. By migrating to Ethereum, Harmony aims to enhance its stability while potentially offering a more robust infrastructure for its ONE token. Moving forward, the network’s governance will play a pivotal role in dictating the specifics of this transition, including community engagement and validator decision-making as outlined in its governance rules, which require significant participation to effect changes.